Volume 1, Issue 6
Table of Contents

Cover Story:
Small Business is BIG Business
In Rockland, small businesses are the engine that drives the economy

RBD Round-Up:
How'd He Do That?
The interesting rise of Mal McLaren
RBD Business Survey
How do you communicate?

DEPARTMENTS:

Economic Round-Up
• The Smart Investor
Your portfolio is doing great, so why rebalance?
• Economic Viewpoint
The U.S. Attraction Factor

Business Round-Up
• Down, But Not Dirty
The best way to handle company layoffs is to provide options
• Marketing By Design
The top 15 campaigns of the last 100 years. You know them all, but why?
• Receivables
One of the largest headaches for small businesses

Ask The Experts
• Talking Taxes
• Payroll: Key Issues
• Workplace Hotline

Invest in Your Community
• Where's the Fire?
Rockland Volunteers - increasing efforts and awareness

Odds & Ends
• The Last Minute
• Rockland Newsmakers

Dedicated Section:
Rockland Business Association:

The President’s Desk
New Healthcare Tax
will hurt small and midsized businesses. Here's how.

RBA/United Way Golf Outing
The Rockland Open: Monday, May 21st

RBA Happenings
• Committee and Council Info
• Calendar of Events
• New Members

So you’re doing the smart thing by diversifying your portfolio, consisting of stocks, bonds, and cash. You did an excellent job of planning as far as the percentages go. You’ve determined your long-term financial goals, and your portfolio looks like this:

Stocks 50% $ 50,000
Bonds 40% $ 40,000
Cash 10% $ 10,000
Total 100% $ 100,000

Now, let’s say April is a hot month for your stocks, and now your portfolio looks like this:

Stocks 58% $ 70,000
Bonds 33% $ 40,000
Cash 8% $ 10,000
Total 100% $ 120,000

You’re ecstatic over the fact that you made $20,000 in the span of one month. And you very well should be. You may also be thinking to yourself, “I should keep this stock the way it is. I could end up making some serious money.”

There is a chance that scenario could become a reality. And you’re taking a risk whenever you choose to invest money. However, the problem with this scenario is that this $20,000 gain moves you, the investor, away from your intended asset allocation and exposes you to some great financial risk. 

You’re probably thinking, “But how is it a risk if I’m up $20,000?” It is a risk if you choose to leave the portfolio as is, because the economy moves in cycles, and your stock could end up plunging so deeply that moving your portfolio back to its original allotment could take years. But forget about this scenario for a second, and take the time to think about this question: If you had a chance to minimize your risks and still make the same amount of money, would you do it?

Investopedia.com defines “portfolio rebalancing” as “the process of realigning the weightings of one's portfolio of assets.” In other words, you do something with that $20,000 so that your portfolio is divided along those same percentages that you allocated when you began building your portfolio.  You can take the money you gained and invest it into your bonds and cash portions so that you’re back to your original percentages. By doing it this way, you make a great amount of money with very little risk!

The general rule of thumb is that you should rebalance when your assets drift 5% or more away from your original allocation. A portfolio that is too heavily weighted in one area can be dangerous because you never know what could happen to certain portions of it. Consider the dot-com crash in 2000.

Many investors let their technology stocks grow and grow, and before they knew it, they had lost all of their money, and had nothing to fall back on.  

Tim Middleton, in his article “Spring Training For Your Portfolio,” compares portfolio rebalancing to bunting in baseball. By rebalancing, you won’t knock the ball out of the park. But by making these small adjustments, you’ll gradually move your assets towards home plate, and eventually, you will have scored the big winning run. RBD

Ken Mahoney is president of Mahoney Asset Management and co-publisher of this magazine. In 2006 he wrote and published the book, Investing from Within, an aid to investors in understanding their investment personalities. A more detailed description can be found on www.amazon.com.

Name	Symbol	Wachovia	WB
Wyeth	Wye	Dress Barn	DBRN
Verizon	Vz	Pharm Resources	PRX
AT&T	T	Usb Holding	UBH
Barr Labs	BRL	Provident Bank	PBNY
Footstar FTAR	FTAR	Bank of NY	BK
Novartis	NVS	Gannet	GCI
Avon	AVP	Presidential Life	Plfe
Praxai	PX	Paxar	PXR
Lecroy	LCRY	ConEdison	ED

This is for your information only and is not an offer to sell, or a solicitation of an offer to buy, securities or instruments mentioned. Information has been obtained or derived from sources believed by us to be reliable, but we do not represent that it is accurate, complete or timely. Any opinions or estimates contained constitute our judgement at date of publication and are subject to change without notice.

This Stock Index is comprised of local stocks of interest based in Rockland County. The chart reflects the collective stock price performance based on a standardized benchmark of 1000 on January 1, 2003. Any market prices are only indicators of market values and are subject to change without notice. It is not possible for an investor to directly invest in the Rockland Stock Index.